Racing Hit By Significant Levy Fall

Bookmaker profits in the final quarter of 2018 were down on estimates | Racing Post

British racing could face prizemoney cuts after the Horseracing Betting Levy Board announced on Friday a drop in the 2018/19 Levy of £17-million. The HBLB had previously forecast of Levy of £89-million for the year, which ended on Mar. 31, but the figure is in fact more like £78-million. That is significantly down from the £95-million returned in 2017/18, the first year that the restructured Levy extended beyond bookmakers in Great Britain. Informal reports presented to the board showed that while the year began on target, the last two months were substantially less profitable than in the prior year. A £78-million Levy income means the board will have incurred a budget deficit of £5-million.

Levy Board Chairman Paul Lee said, “Bookmaker profits in the fourth quarter, particularly in February and March, were reported to be very substantially down on estimates. This has led to a material undershooting of Levy income against forecast, even taking into account that yield was not expected to reach the £95-million of 2017/18. This is only the second year of the extended Levy and the inherent uncertainty was recognised by the board in 2017, which led to its policy of increasing reserves significantly over the past two years. The purpose of having these reserves is to be able to shield racing against substantial fluctuation. However, the scale of the fall in income means that there is a strong probability of having to make further adjustments to expenditure during the Levy year in addition to the £5-million reduction before the end of 2019.

“The variation in yield from £95-million to £78-million in the first two years of the extended Levy makes forecasting 2019/20 income more difficult and will create a challenge in setting a full-year expenditure budget for calendar year 2020 before the end of calendar year 2019. The Board will look to put in place additional reporting arrangements with major bookmakers, who are already helpfully providing significant data to the board on a voluntary basis.”

HBLB’s racing representatives Andy Clifton (Racecourse Association), Julian Richmond-Watson (The Horsemen’s Group) and Nick Rust (British Horseracing Authority) said in a statement, “We were shocked to see the big drop in Levy yield for 2018/19, which was significantly below the previous forecast at the end of March. We share the disappointment that our sport will feel having produced some highly competitive and compelling racing over the past year.

British racing has already come under fire for low prizemoney levels, most significantly over the winter when horsemen boycotted a handful of meetings staged at Arena Racing Company courses after the company cut its contributions to prizemoney.

“The bulk of the Levy income is distributed as prize money,” the statement continued. “At a time when there is already significant debate in the industry around levels of prize money, we appreciate that any potential reduction will cause further concern. Racecourses, The Horsemen’s Group and the BHA have pledged to work through any implications together. Discussions have already begun about how to minimise the impact over the next year.

“We welcome HBLB’s announcement that it is reviewing how it works with bookmakers. We look forward to seeing their proposals for improving the accuracy of forecasts and growing racing’s income stream in line with growth in betting on racing. We want to understand better from betting operators and HBLB whether any systemic issues are emerging that need to be addressed.

While significant changes were made to the Levy in 2017 to increase bookmaker contributions, more may need to be done to grow the profitability of racing.

“The recent positive reporting from the betting sector on the growing attraction of betting on our sport makes clear that the issue isn’t the popularity of racing as a betting product, but rather its potential profitability. As the Levy is based on those betting profits, that is clearly concerning for all in racing.

“The government and Parliament have been very supportive of British racing making important and welcome changes to the Levy in 2017. Like us, they have been waiting to see how these reforms would bed in and what the impact would be on racing’s income. We will discuss this with ministers and officials at the next opportunity.”